Is bitcoin a good investment?

This resource is a wikidebate, a collaborative effort to gather and organize all arguments on a given issue. It is a tool of argument analysis or pro-and-con analysis. This is not a place to defend your preferred points of view, but original arguments are allowed and welcome. See the Wikidebate guidelines for more.

Disclaimer: This is an amateur-made debate/argument analysis, not an investment advice. There is no guarantee that gaps in the arguments made will be properly pointed out in objections.

Bitcoin is a good investment

Pro

• Argument for Bitcoin is a digital analogue of gold, and in the phase before it reaches something like its saturation, it is likely to offer extreme profit yields, which, by the mean value of the investment, compensate the investor for the extreme risk. This makes bitcoin good as an item in investment portfolio, for investors who can afford to lose the bitcoin portion of investment.
  • Objection Unlike bitcoin, gold has some uses beyond being a store of value.
    • Objection Sure, but the price of gold is derived from its use as a store of value rather than from the other uses; the price derived solely from the other uses would be a fraction of it.
  • Objection Unlike bitcoin, gold price level is fundamentally stabilized (despite its considerable volatility), not subject to the huge appreciation observed in bitcoin.
• Argument for Expanding on the above, as of March 2024, bitcoin market capitalization is about 10% that of gold. If one takes bitcoin to be an analogue of gold, that suggests good room for growth.
  • Objection On the other hand, as of March 2024, bitcoin market capitalization surpassed that of silver. It is not clear what makes bitcoin more of an analogue of gold than of silver.
    • Objection Gold is the leader among the physical/material/commodity store-of-value assets (unlike silver) and bitcoin is the leader among cryptographic store-of-value assets. That makes bitcoin more like gold and less like silver.

Con

• Argument against Capable investor Warren Buffett dissuades from bitcoin. Inconclusive yet suggestive.
• Argument against Microsoft co-founder and philantropist Bill Gates looks down on bitcoin. Inconclusive yet suggestive.
• Argument against JPMorgan Chase chairman and CEO Jamie Dimon looks down on bitcoin. Inconclusive yet suggestive.
• Argument against Nassim Nicholas Taleb (noted for the book The Black Swan) looks down on bitcoin. Inconclusive yet suggestive.
• Argument against A bitcoin investor is exposed to regulatory risk, e.g. that state regulators will make bitcoin illegal.
• Argument against A bitcoin holder is either exposed to intermediary risk (of the intermediary company defaulting) or has to own bitcoin directly using methods liable to hardware theft, hardware loss or destruction, password loss/forgetting, and computer hacking.
  • Objection Other currencies, such as gold or fiat, can also be lost, stolen or destroyed.
• Argument against Cryptocurrencies are vulnerable to what U.K.'s FCA calls cyber-attacks (requires clarification and detail).
• Argument against Bitcoin has no intrinsic yield unlike e.g. a field of wheat, a block of apartment buildings or a company held via shares.
  • Objection Bitcoin does not differ from gold in that regard. The above does not detract from the possibility of bitcoin providing great yields in its early adoption phase.
• Argument against Bitcoin is similar to a Ponzi scheme: the late comers pay for the huge profits of the early comers. The bitcoin investors merely speculate on whether they will be the early comers--the winners--or the late comers--losers, and they bet on being the early comers. (This is an expansion on or rephrasing of the above, bitcoin having no intrinsic yield.)
  • Objection Perhaps bitcoin does have an intrinsic yield, following from its serving criminals to realize their profits.
    • Objection Even that kind of yield does not provide for a huge growth of bitcoin price in the decades to come: once something like a saturation overall bitcoin price level is reached, the huge profits realized from huge mid-term growth are over.
  • Objection A Ponzi scheme is a fraud; by contrast, in bitcoin, the buyers know the nature of the asset (no intrinsic yield).
    • Objection Fair enough as for Ponzi scheme. However, the logic of the late comers paying for the profit of the early comers holds true enough.
• Argument against Bitcoin mining is energy intensive and its energy consumption grows exponentially with use. Unless the underlying proof-of-work algorithm changes (like Ethereum did), Bitcoin will eventually become unsustainable and public opinion is will turn against it, causing it to sink.
  • Objection It is not clear what it means for bitcoin to "sink", nor is it clear how environmentalism-related unfavorable public option will cause bitcoin to lose value since its value depends only on the opinion of those who hold it and trade in it.
  • Objection The Wikipedia article used above as a reference does not contain the word "exponential" and it is therefore not clear it can substantiate that bitcoin energy consumption "grows exponentially with use".
  • Objection Wikipedia, used above for reference, is not a reliable source: anything that can be sourced from Wikipedia one should be able to source directly from sources used by Wikipedia.
  • Objection If the market value of one bitcoin drops significantly below the energy cost (and hardware cost, etc.) required for mining an additional bitcoin, one would think the mining will stop or greatly slow down, which will solve the environmental problem. And if the energy cost of mining an additional bitcoin will be exponentially increasing, the described condition will surely set in relatively soon.

Further reading

• Bitcoin#Use for investment and status as an economic bubble, wikipedia.org
• Bitcoin Price Prediction – Forbes Advisor Australia, forbes.com
• The brutal truth about Bitcoin, brookings.edu
• ETF approval for bitcoin – the naked emperor’s new clothes, 2024, ecb.europa.eu
• Cryptocurrencies II: Last Week Tonight with John Oliver (HBO), 24 Apr 2023, youtube.com
• Opinion | Transaction Costs and Tethers: Why I’m a Crypto Skeptic by Paul Krugman, 31 Jul 2018, nytimes.com
• Rebuttal — Transaction Costs and Tethers: Why I’m Not a Crypto Skeptic by Calvin Cooper, 2018, medium.com
• Nobel prize-winning economist Joseph Stiglitz criticizes bitcoin by Ali Montag, 2018, cnbc.com
• Wirtschaftsprofessor: Darum hat der Bitcoin keine Zukunft // Mission Money, 2 Mar 2021, youtube.com (in German) -- an interview with Swiss economist Thorsten Hens